a usgovernmentspending.com briefing:

US Government Spending
in Recent Decades

After pausing in the aftermath of the Great Recession, spending is set to resume its growth.

Spending Steadily Increasing

Government spending in the United States has steadily increased
from $1.5 trillion in the mid 1980s to over $6 trillion today. But as a percent of
GDP it has kept in a range from 33 percent to 38 percent of GDP.

Government spending first reached $1.5 trillion in the mid 1980s, and then breached
$2 trillion in the recession year of 1991. In the 1990s spending increases started to
level off, reaching $3 trillion in 1999. But in the 2000s with the dot-com crash and the response
to 9/11
government spending began to accelerate, reaching $4 trillion in 2004 and $5 trillion in 2008.
Then came the Crash of 2008 and government spending exploded to $6 trillion in 2010. After
a few years of modest growth in nominal dollars, spending is expected to resume regular increases by the late 2010s.

Viewed as a percent of Gross Domestic Product (GDP) government spending in recent years has
remained stable. At 35 percent of GDP in 1985, spending decreased as a percent of GDP until
the recession of 1990-91 when it increased to over 37 percent of GDP. Then a steady decline
in spending as a percent of GDP set in for the rest of the 1990s, declining to 32.8 percent
of GDP in 2000. But spending increased in the 2000s to 35 percent of GDP under the influence
of the recession of 2000-01 and increased defense spending after 9/11.

In the Crash of 2008 government spending increased sharply to bail out the banks and to
provide "stimulus" to the economy. Spending reached 42.4 percent of GDP in 2009.
But spending is expected to decline and plateau at about 38 percent of GDP in the next few years.

Recent Spending by Government Level

Federal spending as a percent of GDP has shown a decline in recent decades with a modest
increase in the 2000s —
until the Crash of 2008.
But state and local spending have increased.

Federal spending stood at 22.4 percent of GDP in 1985. State government
spending was 6.4 percent of GDP and local spending was 9.2 percent of GDP.
Over the next 15 years federal spending steadily decreased as a percent of GDP, declining to 18.1 percent of GDP
in 2000. But by 2000 state spending
had increased to 7.7 percent of GDP and local spending had increased to 10 percent of GDP.

In the 2000s federal spending increased to 19.5 percent of GDP by 2007, state spending
increased to 8.4 percent of GDP and local spending increased to 10.6 percent of GDP. Then
came the Crash of 2008. In 2009 federal spending peaked at 23.8 percent of GDP, state spending
stood at 9.5 percent of GDP and local spending peaked at 11.6 percent of GDP.

Chart Key: - Local direct spending - State direct spending - Federal direct spending - Transfer to state and local

In the near future, federal spending is expected to grow slowly to 21.7 percent of GDP by 2020, state
spending to stabilize at 8.3 percent of GDP, and local spending increase to 8.9 percent of GDP.

Recent Defense Spending

Defense spending declined in the 1990s, increased in the 2000s, and is declining
in the 2010s.

Defense spending stood at just under 7 percent of GDP at the height of the Reagan defense buildup. But
it began to decline after the mid-1980s, declining below 6 percent in 1989, below 5 percent in 1994
and bottoming out at 3.45 percent of GDP in 2001. The terrorist attack of 9/11 changed that, and defense spending
began a steady increase, reaching almost 5 percent of GDP in 2008 with the “surge”
in Iraq and
5.7 percent in 2011 with the stepped up effort in Afghanistan. Defense spending declined
to 4.24 percent of GDP in 2017 but is budgeted to increase to 4.5 percent GDP by 2019.

Pensions and Health Care Spending

Pensions and health care spending have increased steadily in recent years.

Government pensions, primarily Social Security, cost about 5.3 percent of GDP in 1985.
Government health care, primarily Medicare and Medicaid, cost 3.5 percent of GDP. Since then,
pension expenditure has increased, by 2011, to 6.5 percent. But health care expenditure has
more than doubled as a percent of GDP to 7.4 percent of GDP in 2011. In the late 2010s pension
spending has leveled off at about 7.9 percent GDP.

Health care is primarily a federal and state concern. In 1985 direct federal health care
spending amounted to 2.4 percent of GDP with an additional 0.5 percent of GDP transferred
to states for Medicaid. States spent 1.1 percent of GDP on health care in 1985, and
local governments spent 0.6 percent of GDP on health care.

By 2000 the federal government was spending 3.6 percent directly on health care and sending
1.7 percent of GDP to the states. State health care spending had doubled to 2.3 percent of
GDP. Local health care spending had increased to 0.7 percent of GDP.

By 2010 health care had jumped again. Federal health care spending had increased to 5.5
percent of GDP, with an additional 2.1 percent sent to the states. States were spending 2.9
percent of GDP on health care and local governments 0.9 percent of GDP.

In the 2010s health care spending has been slowly decreasing as a percent of GDP. Federal health
care spending is expected to be nearly 6 percent of GDP by 2020, but state health care spending is expected to level off at 3.9 percent GDP and local health care spending is estimated to
persist at 0.8 percent GDP.

Education Spending

Chart Key: - Local direct spending - State direct spending - Federal direct spending - Transfer to state and local

Education spending occurs primarily at the local level in the United States. In 1985
local governments spent 3.2 percent of GDP on education. The federal government spent 0.7
percent of GDP directly on education and transferred 0.4 percent of GDP to states and local
governments. States spent 1.2 percent of GDP on education.

By 2000 local governments were spending 3.8 percent of GDP on education, and states were
spending 1.3 percent of GDP. The federal government was transferring 0.5 percent of GDP
for states and local governments to spend, and directly spending 0.6 percent of GDP on
education.

Ten years later, in 2010, local governments were spending 4.1 percent of GDP on education,
and states were spending 1.7 percent of GDP.
The federal government was transferring 0.6 percent of GDP
for states and local governments to spend, and directly spending 0.9 percent of GDP on
education.

In the 2010s education spending has declined as a percent of GDP. At mid decade federal education
spending is down to 0.74 percent GDP, state spending is down to 1.6 percent GDP and local education
spending is down to 3.3 percent GDP. Continued decreases are expected for the rest of the decade.

Welfare Spending

Welfare spending (other than Medicaid) in the United States tracks with the business cycle. Starting at 3.4 percent
of GDP in 1985, welfare spending had declined below 3 percent of GDP by 1989. Then the recession of 1990-91 recession hit and welfare spending increased to nearly 3.4 percent of GDP by 1992. With the help of
welfare reform in 1996, welfare spending declined back down below 2.4 percent of GDP by 2000, just
in time for the recession of 2000-01.

In the early 2000s, welfare spending increased, reaching over 3.1 percent of GDP by 2003,
and then declined back down to 2.5 percent of GDP by 2007. In the Great Recession of 2007-09
welfare spending exploded, reaching 4.7 percent of GDP
in 2010. Welfare spending is declining sharply in the recovery from the Great
Recession, down to 2.5 percent GDP in 2015. A further decline to just over 2 percent GDP is
expected by 2020.

Data Source

On October 15, 2018, the US Treasury reported in its Monthly Treasury Statement (and xls) for September that the federal deficit for FY 2018 ending September 30, 2018, was $779 billion. Here are the numbers, including total receipts, total outlays, and deficit compared with the numbers projected in the FY 2019 federal budget published in February 2018:

Federal Finances
FY 2018 Outcomes

Budget
billions

Outcome
billions

Receipts

$3,340

$3,329

Outlays

$4,130

$4,108

Deficit

$833

$779

usgovernmentspending.com now shows the new numbers for total FY 2018 total outlays and receipts on its Estimate vs. Actual page.

The Monthly Treasury Statement includes "Table 4: Receipts of the United States Government, September 2018 and Other Periods." This table of receipts by source is used for usgovernmentspending.com to post details of federal receipt actuals for FY 2018.

This FTS report on FY 18 actuals is a problem for usgovernmentspending.com because this site uses Historical Table 3.2--Outlays by Function and Subfunction from the Budget of the United States as its basic source for federal subfunction outlays. But the Monthly Treasury Statement only includes "Table 9. Summary of Receipts by Source, and Outlays by Function of the U.S. Government, September 2018 and Other Periods". Subfunction amounts don't get reported until the FY20 budget in February 2019. Until then usgovernmentspending.com estimates actual outlays by "subfunction" for FY 2018 by factoring subfunction budgeted amounts for FY18 by the ratio between relevant actual and budgeted "function" amounts where actual outlays by subfunction cannot be gleaned from the Monthly Treasury Statement.

Final detailed FY 2018 actuals will not appear on usgovernmentspending.com until the FY 2020 federal budget is published in February 2019 with the actual outlays for FY 2018 in Historical Table 3.2--Outlays by Function and Subfunction.